Grieving Australians are suffering because of super fund failure: ASIC

The corporate watchdog has blasted top executives and board directors at Australia’s $4.1 trillion superannuation industry for failing to prioritise grieving families when paying out their members’ death benefits.

The Australian Securities and Investments Commission (ASIC) on Monday released a landmark report examining super funds’ handling of death benefit claims, just months after it launched litigation against two large industry funds for their alleged litany of failures.

ASIC chair Joe Longo at an Australian Institute of Company Directors’ conference this month after announcing the regulator was suing AustralianSuper. Credit: Dominic Lorrimer

In one case highlighted by the regulator, a woman waited almost a year to receive her husband’s $500,000 death benefit even though there was a binding nomination and no other claimants. ASIC laid bare the “frustrating interactions” the wife had with the fund, including its requests for documents that had already been provided.

“At the heart of this issue is leadership that doesn’t have a grip on the fund’s data, systems and processes – and ultimately, it is the customers who suffer for it,” ASIC chair Joe Longo said.

“This kind of disconnect is unacceptable in any area of corporate Australia, but in the superannuation sector it is particularly serious because super affects everyone from the boardroom to the living room.”

At a press conference on Monday, Longo would not be drawn on whether funds with more independent and skilled directors had better customer service, but said the responsibilities of a board member were clear regardless of how they were appointed.

“The governance challenges facing the sector relating to the foundational duties and expectations of directors – they need to take ownership of problems and fix them,” he said. “When I say that some super trustees are failing Australians in a critical service, it should be a warning to all directors not to let their fundamental duties slip.”

None of the 10 trustees ASIC examined monitored or reported on end-to-end death benefit claim handling times, ASIC said.

Avanteos, part of Colonial First State, was the fastest trustee in dealing with claims, closing cases about 48 per cent of the time within 90 days, compared with the slowest – Rest – which resolved 8 per cent of claims within 90 days.

ASIC’s report, which made 34 recommendations, will heap further pressure on the industry that has been under the spotlight recently for myriad corporate governance failures. The regulator has already taken Cbus and AustralianSuper to the Federal Court for not acting “efficiently, honestly and fairly” when handling death benefit and disability insurance claims.

In court documents, ASIC argued Cbus did not process 10,000 claims within a reasonable time; did not properly assess the scale of the delays; failed to take appropriate action to reduce the delays; and did not properly identify the risks that its claims-handling system posed to members.

Separately, ASIC has claimed AustralianSuper took between four months and four years from the date the claim form was returned to resolve the case at least 6800 times between 2019 and 2024.

While Cbus has previously blamed its third-party administrator Link Group for the delays, and AustralianSuper resolved to bring its claims handling internally last year, ASIC said 80 per cent of the delays it examined for its report were caused by issues within the control of the trustee.

“Grieving Australians should not have to suffer further stress because of the failure of superannuation trustees to approach claims in a timely, clear and respectful manner,” ASIC Commissioner Simone Constant said.

“Trustees have not put in place meaningful performance objectives, tracking or reporting, and have failed to approach claims handling with consumers front of mind.

“Many of the complaints we read were distressing. We saw deep grief, vulnerability, frustration and genuine suffering.”

Longo on Monday flagged ASIC could launch legal action against more funds over issues related to payouts.

The report noted, on average, there were 8.8 complaints per 1000 deaths to the Australian Financial Complaints Authority. One fund it reviewed, but did not identify, had 30.1 complaints per 1000 deaths, while the fund with the least complaints – 0.8 per 1000 – was Colonial First State, this masthead has confirmed.

Misha Schubert, chief executive of super fund industry body Super Members Council said it acknowledged ASIC’s report with “deep empathy”, and said there was still work to be done by super funds to improve death benefit processing.

⁣“Super fund members and their families rightly expect and deserve the highest standards of service, care and compassion – especially in the hardest of times,” Schubert said. “We are deeply committed to ensuring the highest possible standards of customer service – that’s what Australians with their retirement savings in super rightly expect.”

Similarly, Mary Delahunty, chief executive of the Association of Superannuation Funds of Australia (AFSA) apologised to members, and said getting services right for First Nations members and their families was a priority for the organisation.

ASIC’s probe found super fund members living in First Nations postcodes generally experienced greater delays than other members, with some of the trustees surprised to discover they had a relatively high proportion of members who were more likely to be Aboriginal or Torres Strait Islanders.

The regulator highlighted the case of an Indigenous woman who waited more than 500 days to receive her husband’s $100,000 death benefit after the trustee ignored her concerns she was experiencing financial hardship and finding it difficult to understand the claims process. In another case, an Indigenous grandmother who lived in remote Australia waited 16 months for her claim to be resolved because of delays caused by the trustee.

In a statement, Brighter Super said the fund had made improvements its claims handling processes.

“We have proactively introduced new internal processes including workflow monitoring systems, expanded approval authorities for our claims team and reduced paperwork for smaller claims, whilst enhancing our online beneficiary nomination processes, member communications and trust deed,” a spokeswoman said.

Brendan Daly, Rest’s chief service officer said the fund acknowledged there had been times when the fund had not met its members’ expectations, but it also had worked on improving its processes.

“Since the time of the ASIC data collection in 2024, we’ve made significant improvements to the speed of our death benefit claims handling and have now tripled the number of claims resolved within 90 days,” Daly said. “We have also reduced the number of open claims at 180 days by a third and expect to continue resolving claims at this pace, or more quickly, going forward.”

A spokesperson for ART also said the fund had improved how it dealt with death benefit payments recently. “Our members are our priority, and we’re committed to delivering further improvements wherever required to help ensure we meet their needs and those of their beneficiaries,” the spokesperson said.

Commonwealth Superannuation Corporation, HESTA, Hostplus, AMP and MLC were contacted for comment. UniSuper and Colonial First State declined to respond as they had not seen the final report.

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